CB taps veteran to expand hotel operation

Real Estate Alert, May 19, 2004

CB Richard Ellis has hired industry veteran Kevin Mallory to oversee its hotel operation.

Mallory joined the firm this week after ending a three-year stint as a senior vice president of Hyatt Development. He previously ran the lodging practice of Lend Lease Real Estate Investments.

Mallory's principal mandate is to make CB's hotel partners group a player in the high-end hotel market, both as a broker and asset manager. The group has been successful with mid-market hotels--for example, last month it started marketing a $300 million portfolio of Fairfield Inns for First Winthrop. But it has not made a serious dent at the upper echelon of the market.

Mallory, who is based in Chicago, will be more of a manager than a broker. He is expected to hire at least two rainmakers. "We need to give CBRE a face, a presence, that just doesn't exist today with certain clients," he said. "We have relationships with REITs, pension-fund advisors and others who are among those buying high-end lodging," but those relationships are limited to other property types. By bringing in experienced brokers of high-end hotels, Mallory expects CB can broaden its existing relationships, as well as attract new clients.

The hotel partners group has 25 sales brokers, although it was weakened by the February departure of Thomas McConnell to rival Cushman & Wakefield. McConnell established Insignia/ESG's hospitality practice after the brokerage merged with Hotel Partners in 1998. Insignia merged with CB last year. McConnell's client list included Donald Trump, Wyndham Hotels, Credit Suisse First Boston and Citigroup. Joining McConnell in the move to Cushman was senior hotel broker Paul Fitzpatrick.

Greg Vorwaller, CB's president for investment properties, said that CB has benefited both from the merger with Insignia as well as rising demand for hotel properties. He said CB and Insignia combined had about $500 million of hotel deals last year in the U.S., and $247 million of deals in the first quarter of this year alone. The company expects sales to top $1 billion for the year.

"In terms of deal volume, Insignia was always in the Top 5," but not a key player in the high end of the market, said Vorwaller. "With Kevin's experience, the expectation is that we can become a pre-eminent player across the spectrum, from luxury to extended-stay hotels."